CEOs Risk 3-year Jail Over IT Tax Default

Some company chiefs are jail bound for default in payment of Information Technology (IT) tax as the authorities prepare for a clampdown on defaulters.

IT tax which was instituted by the National Information Technology Agency Act (NITDA) 2007, stipulates that specified companies are to contribute one per cent of their Profit Before Tax (PBT) to the Federal Inland Revenue Service (FIRS).

The Act prescribed between one and three years jail term for defaulters whether in the financial sectors and telecommunications sectors, or any other company that uses IT to operate.

The pool of IT tax fund, the Act stipulates, will facilitate the creation of Technology centres across the country which will create jobs for the teeming population of IT savvy youths, fight cyber security and drive digital inclusion.

But a very reliable source at NITDA told LEADERSHIP, on ground of anonymity, that top companies operating in the country over the years have failed to remit the stipulated one per cent of their PBT to the agency, feigning ignorance of the provision of the Act.

Our source explained that the agency had officially written letters to the defaulting companies as first remedial measure after which clampdown will subsequently follow.

Analysts have also criticised poor management of the fund so far generated, saying there is no evidence of the usefulness of the fund to the Information Technology sector as the money thus generated has not been put into positive use for transforming the Nigerian IT sector to match other developing countries.

Some over time argued that IT tax is an additional burden on companies considering the 30 per cent of company’s income tax companies are already liable and that such could lead to multiple tax from the same tax base.

The Vice President, Chartered Institute of Taxation of Nigeria (CITN), Ms. Gladys Olajumoke, said the IT levy was instigated to generate funds for the development of IT in Nigeria.

She said, “Since it is a levy, it is tax deductible.”

She noted that FIRS should have official contacted companies that have failed to oblige not NITDA.

She explained that the NITD Agency Act, 2007, imposes a Levy of one per cent on the PBT of Companies and Enterprises in the technology, Financial and information businesses which annual turnover is N100million and above.

“The levy is tax deductible when computing a company’s profits for tax purposes. The levy is administered/assessed by FIRS but accrues to national information technology development fund and goes to the accounts of the National information technology development Agency,” she said.

Highlighting involved offences and penalties for defaulting companies she said, “Failure day on the due date attracts a penalty of two per cent of the levy unpaid due date is 60days after FIRS has served the notice of assessment on the company.

Further investigation revealed that some banks over the years have continued to remit below the expected one per cent of their PBT to FIRS.

LEADERSHIP can authoritatively report that two banks in Nigeria, Zenith Bank Plc and Guaranty Trust Bank Plc lead others in payment of Education Tax and NITDA Tax.

Specifically, Zenith Bank in the last two years paid N2.67 billion on IT levy and N1.6 billion on Education Tax.

The NITDA’s spokesperson, Hajia Hadiza Umar in a telephone chat with LEADERSHIP confirmed that some top companies operating in the country were in default of the IT levy.

She disclosed that the government agency had officially written a warning letter, mandating them to remit the one per cent of their PBT to FIRS.

In her words, “The IT levy involved financial institutions and Technology companies.

“The agency has officially written to some companies. Mind you, some companies were not aware of the IT levy. It is now that the agency is ready to take legal actions on defaulting companies.

“Usually, companies are supposed to be remitting their one per cent PBT at December 31 of every year to the FIRS.”

On companies that are not paying up to the one per cent PBT, she said, “the new DG has setup a committee to check from FIRS to know those companies that have violated the IT levy.

“We will have to sound warning signals before taking actions which will involve a punishment of one to three years jail terms.”

She noted that the agency continued to utilize the remitted funds to implement different IT projects across the country.

According to her, “A lot of schools, both tertiary and primary, have been benefitting from the Fund. There are some tertiary institutions that we established virtual library with over 100 computers.”

But the FIRS spokesperson, Wahab Gbadamosi said tax payment is based on profit, stressing that if company does not make profit, they are not supposed to pay tax.

He noted that the FIRS has different penalties for tax offenders.

According to him, it is compulsory that companies operating in the country pay the IT levy, Education Levy, among other levies as stipulated by the law.

“If a company’s account is in public domain, it will be clear for the public to know the level of compliance. If a company does not pay, we first write it to pay and thereafter present outstanding to them.

“The FIRS has a lot of companies’ data. I cannot say all of them have been paying. Some companies don’t even know that they will need to pay the IT levy; the same was applicable to the Value Added Tax (VAT) and Education Tax.

“We could join hands in enforcing the IT Levy and Education Levy because it is in order. It is something we could escalate going forward.

He admitted that commercial banks and IT firms are hiding under the pretense of not knowing that the levies exist.

According to him, “Commercial banks know the tax law more than you and me.”

Further breakdown on commercial banks compliance on IT Tax and Education Tax revealed that First Bank of Nigeria Holdings Plc, paid N903 million on IT Tax and N296 million on Education Tax.

Others are United Bank for Africa Plc (UBA) income tax on N1.49 billion in two year and N396 million on Education Tax while First City Monument Bank (FCMB) Group Plc remitted N269 million on IT Tax to FIRS and N159 million on Education Tax.

“Anybody, corporate or person who commits an offence under NITDA where no specific penalty is provided is liable on conviction: for a first offence, to a fine of N200,000 or imprisonment for a term of one year or to both such fine and imprisonment and for a second and subsequent offences, to a fine of N500,000 or imprisonment for a term of 3years or both such fine and imprisonment.”

She added that FIRS should be aggressive in sanction companies that have defaulted government levies on corporate entity.

Further investigation revealed that some banks over the years have continued to remit below the expected one per cent of their PBT to FIRS.

LEADERSHIP can authoritatively report that two banks in Nigeria, Zenith Bank Plc and Guaranty Trust Bank Plc lead other commercial in payment of Education Tax and NITDA Tax.

Specifically, Zenith Bank in the last two years paid N2.67 billion on IT levy and N1.6 billion on Education Tax.

The NITDA’s spokesperson, Hajia Hadiza Umar in a telephone chat with LEADERSHIP confirmed that some top companies operating in the country were in default of the IT levy.

She disclosed that the government agency had officially written a warning letter, mandating them to remit the one per cent of their PBT to FIRS.

In her words, “The IT levy involved financial institutions and Technology companies.

“The agency has officially written to some companies. Mind you, some companies were not aware of the IT levy. It is now that the agency is ready to take legal actions on defaulting companies.

“Usually, companies are supposed to be remitting their one per cent PBT at December 31 of every year to the FIRS.”

On companies that are not paying up to the one per cent PBT, she said, “the new DG has setup a committee to check from FIRS to know those companies that have violated the IT levy.

“We will have to sound warning signals before taking actions which will involve a punishment of one to three years jail terms.”

She noted that the agency continued to utilize the remitted funds to implement different IT projects across the country.

According to her, “A lot of schools, both tertiary and primary, have been benefitting from the Fund. There are some tertiary institutions that we established virtual library with over 100 computers.”

But the FIRS spokesperson, Wahab Gbadamosi said tax payment is based on profit, stressing that if company does not make profit, they are not supposed to pay tax.

He noted that the FIRS has different penalties for tax offenders.

According to him, it is compulsory that companies operating in the country pay the IT levy, Education Levy, among other levies as stipulated by the law.

“If a company’s account is in public domain, it will be clear for the public to know the level of compliance. If a company does not pay, we first write it to pay and thereafter present outstanding to them.

“The FIRS has a lot of companies’ data. I cannot say all of them have been paying. Some companies don’t even know that they will need to pay the IT levy; the same was applicable to the Value Added Tax (VAT) and Education Tax.

“We could join hands in enforcing the IT Levy and Education Levy because it is in order. It is something we could escalate going forward.

He admitted that commercial banks and IT firms are hiding under the pretense of not knowing that the levies exist.

According to him, “Commercial banks know the tax law more than you and me.”

Further breakdown on commercial banks compliance on IT Tax and Education Tax revealed that First Bank of Nigeria Holdings Plc, paid N903 million on IT Tax and N296 million on Education Tax.

Others are United Bank for Africa Plc (UBA) income tax on N1.49 billion in two year and N396 million on Education Tax while First City Monument Bank (FCMB) Group Plc remitted N269 million on IT Tax to FIRS and N159 million on Education Tax.